The Blog

The exit strategy: clocking off for the last time

As a business owner, moving on from your enterprise can be one of the biggest decisions you’ll ever make. And whether it’s because you’re moving onto a new venture or simply ready for retirement, planning your business exit strategy well in advance is key to maximising the value you extract.

Why do I need to plan my exit strategy early?

While many may sit comfortably under the assumption that their business is their pension, without a plan of action you may be left at a loose end, with no way to realise the true value of your investment. It’s never too early to start planning your exit strategy – something which may seem alien to the owner of a young and growing enterprise. However, the end of a business is just as important as its beginning when looking to protect its stakeholders and, of course, yourself.

What are my options?

At the end of the day, your exit strategy of choice will depend largely on what you want to take away – be it a life of freedom with a lump sum or keeping an eye on things from afar. We’ve simplified some of the common business exit strategies taken by UK business owners to get you thinking about your future:

Succession

Many business owners choose to name a successor – usually a close family member, whereby the value of the business is kept within the family name. However, this strategy involves mixing personal relationships and emotions with business, and some business minds may struggle not to interfere down the line. It’s essential to identify potential successors and establish their level of commitment, as well as your understanding of your future role when stepping down. Unfortunately, there’s no guarantee that your chosen successor will be able to continue to run your business profitably. Therefore, it’s essential to ensure that you have a plan B, should profits fail to materialise – especially if your retirement income is dependent on the continued success of your business after you retire.

Selling up

Perhaps one of the most common exit strategies, selling your business can offer a clean break – providing you with a lump sum to put towards retirement or your next venture. Whether you sell to another business, a private investor or existing members of staff, in order to maximise the amount you receive it’s vital that your business presents an attractive offer. This means that your personal skill-set must not affect the value of your business when you leave, and the ventures which gain the best sale price are those with both a proven profit record and self-sustaining operations. Selling your business can be a highly effective route to take when it comes to extracting its maximum value, and achieving a clean break. As a small business owner, you may qualify for entrepreneurs’ relief, meaning this could be an extremely tax effective way of converting business value into cash. Contact the experts at Vital Wealth Management to find out more about selling your business and entrepreneurs’ relief.

Closing down

Although closing down is commonly associated with financial problems in a business, it can sometimes be the most logical option when you’re ready to move on. This is particularly true when your business is inextricably tied to your own skills and business contacts, and without your involvement the business may be unable to continue. Although closing down and selling your assets is fairly easy as a sole trader, things can become more complex when you employ staff and it’s vital that you seek professional advice when considering this option.

If you’re planning to step down entirely and perhaps retire, both exit strategy and retirement planning are key factors in a smooth transition – and there’s no time like the present. The earlier you plan your business exit strategy, the earlier you can begin planning your retirement and putting money aside to fund it.

Vital Wealth Management is a trading style of Johnston Financial Limited, who are authorised and regulated by the Financial Conduct Authority. Johnston Financial Limited is Registered in Scotland, No. SC108188.